The Belgium international moves on a free transfer having reached the end of his contract with the Eredivisie champions and pens terms until June 2020 at Mestalla.
Bakkali was thought to be interesting several clubs throughout Europe, but the 19-year-old has opted for a move to La Liga.
"I am very young and it is a big step for me to join a club with the tradition and qualities of Valencia, in such an attractive and competitive league," Bakkali told Valencia's official website.
"I arrive here fully motivated to work hard and to help my new team-mates. I had decided a while ago that I wanted to continue my career away from Eindhoven and I had many options from which to choose.
"Coming to Valencia and La Liga is a dream come true for me."
Bakkali made 16 Eredivisie appearances during a breakthrough 2013-14 season, scoring three goals in the process, but was not used at all last term due to a row over his refusal to sign a new deal.
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